Q4 2023 Earnings Summary
- Return to positive e-commerce growth, with direct-to-consumer (DTC) sales increasing by 10% year-over-year and average order value exceeding $57, driven by increased subscriptions (now 46% of DTC net sales) and effective marketing partnerships.
- Strong expected revenue growth across multiple channels, with guidance of 10% to 15% growth in net sales for full year 2024, supported by expanded distribution in natural and conventional retail channels, and recovery in Amazon sales after resolving prior challenges.
- Improved operational efficiency and profitability, achieving positive net income and positive cash flow for the first time, and the ability to grow revenue without significant increase in operating expenses, leading to operating leverage.
- The company's ambitious growth projections rely heavily on expanding into the conventional retail space where they currently have very few distribution points, posing significant execution risk in achieving these expansions.
- The company has experienced operational risks and quality control issues, including a quality event that caused them to withdraw all inventory from Amazon and resulted in the loss of 5 to 6 months of creamer sales on that platform. This raises concerns about their ability to maintain consistent product quality.
- Despite projecting sufficient cash to fund operations into 2026, the company is considering securing an asset-backed loan to support operations or growth, indicating potential liquidity concerns.
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Revenue Guidance and Growth Drivers
Q: What gives confidence in revenue growth next year?
A: CEO Jason Vieth expressed confidence in revenue growth driven by several factors. The company expects significant growth on Amazon due to lapping a previous quality event that affected sales. Direct-to-consumer sales are also expected to grow, leveraging strong performance on lairdsuperfood.com, effective marketing partnerships, and increased subscriptions. Additionally, there's a significant opportunity in wholesale, particularly in conventional retail channels where the company has minimal presence. They've expanded distribution in natural channels like Whole Foods and Sprouts and plan to aggressively pursue conventional retail to drive growth. -
Operating Leverage and OpEx Growth
Q: What OpEx growth supports the sales guidance?
A: CEO Jason Vieth stated that the team is built to scale without substantial additional OpEx. Variable costs like broker commissions and Amazon selling costs will increase with sales, but overall, the organization can support growth without significant new investments. The company can even handle acquisitions or significant scaling in the next 12–18 months without additional OpEx. -
E-commerce Growth Drivers
Q: What's driving lairdsuperfood.com's e-commerce growth?
A: CEO Jason Vieth reported a 10% growth on lairdsuperfood.com, the first in years. This growth is driven by re-engaging Laird Hamilton and Gabby Reece as brand representatives, partnerships with influencers like Sean Ryan, and optimizing marketing spend for higher return on ad spend (ROAS). Nearly 50% of DTC revenue now comes from subscriptions, enhancing customer retention and lifetime value. -
Returns and Discounts Improvement
Q: Where is the improvement in returns and discounts coming from?
A: CFO Anya Hamill explained that returns and discounts were the lowest in the year, mainly due to optimized spending in the wholesale business. In Q2 and Q3, the company invested heavily in retail growth, but they have since pulled back to more optimized levels. Similar savings are seen in DTC, but the majority is from retail. They expect mid-teens percentage discounts to continue in 2024. -
Asset-Based Lending (ABL) Usage
Q: Will the ABL be used next year for inventory or demand?
A: CFO Anya Hamill stated that while the company has enough cash to get through 2024 and 2025, the ABL is available if needed for working capital expansion or other opportunities. It serves as additional liquidity in case it's needed. -
Product Expansion into Adjacent Categories
Q: Will you expand into performance-centric categories?
A: CEO Jason Vieth acknowledged discussions on expanding into more performance-based categories like ready-to-drink shakes. With the business turnaround and improved gross margins, they are now in a position to consider expansion into adjacent categories reflecting Laird's athletic image.